The Fair Tax: Would It Work?

Just what is the Fair Tax? And is it a workable plan? Dr. Walter Williams, at Jewish World Review, writes an article titled "The Fair Tax Book" in which he tells us what the Fair Tax is and what it would take to make it work.

First of all, Dr. Williams tells us what the Fair Tax is.

If enacted, the Fair Tax would eliminate: the federal individual income tax, alternative minimum tax, corporate and business taxes, capital gains tax, Social Security and Medicare taxes, and estate and gift taxes. These taxes would be replaced by a 23 percent sales tax on all goods and services sold at the retail level. The Fair Tax would be revenue-neutral in the sense that it would replace the revenue from current federal taxes; thus, it would change the way government is funded.

That's a nice, useful summary of what we are talking about here. Next, after describing some of the benefits of this Fair Tax, Dr. Williams give us three conditions that would be necessary to making it work. He writes:

The Fair Tax is an excellent idea, but only under three conditions: first, the repeal of the Sixteenth Amendment that created the income tax; second, a provision fixing the tax at, say, 23 percent; and third, a constitutional amendment mandating that a tax increase requires a three-fourths vote of Congress. Notwithstanding any provisions within the Fair Tax, if the Sixteenth Amendment weren't repealed, down the road we'd find ourselves with a national sales tax and an income tax.

A wise man, that Dr. Williams!

Last of all, Dr. Williams points out another problem and gives us his solution.

The method used to finance the federal government is very important, but I've always argued that government spending is the true measure of its impact on our lives. If there were a Fair Tax, what's to stop Congress from deficit spending or inflating the currency? Deficit spending and inflation are simply alternative forms, albeit less obvious, of taxation.

You say, "What's Williams' solution?" My solution is an amendment limiting federal spending to a fixed percentage, say, 10 percent of the gross domestic product. You say, "Why 10 percent?" If 10 percent is good enough for the Baptist Church, it certainly ought to be good enough for Congress.

The entire article is interesting and will give you some food for thought. We really need to do something.